What if California revives IOUs to pay its bills?
California issuing IOUs again is a cash-flow timing problem, not insolvency — vendors and the muni market discount the warrants briefly, but it resolves on budget passage with minimal broad-market impact. Directly rhymes with California's 2009 registered-warrant episode, which caused local pain but no national contagion. The transmission is California's vendors and muni holders; the forward angle is that California's deep liquidity and tax base make this a political-theater event — the crypto/equity cascade modeled here vastly overstates the spillover.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 0–6 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a mixed shock. A budget impasse forces California to issue registered warrants (IOUs) to pay bills again. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ — which propagate through our causal graph to the markets below.